Sanctions: Latest Developments
The maritime sector is facing a constant and evolving threat from sanctions risks, exacerbated by the ever-changing sanctions environment and the tactics used by sanctions evaders to circumvent restrictions. The latest wave of Russian sanctions has brought this issue into focus, increasing pressure on maritime sector participants to identify, assess, and mitigate these risks, including deceptive shipping practices flagged by regulators.
Guidance from Regulatory Bodies
The US Department of State, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), and the US Coast Guard issued guidance in May 2020 to address illicit shipping sanctions evasion practices. This was followed by the United Kingdom’s His Majesty‘s Treasury’s Office of Financial Sanctions Implementation (OFSI) issuing its own maritime guidance in December 2020. These advisories highlight common techniques used by sanctions evaders in the maritime sector and associated red flags that entities should use to assess their control frameworks and identify gaps.
Impact of Russia-Related Sanctions
The recent series of Russia-related sanctions implemented by the UK, US, EU, and others has significantly impacted the maritime sector. This highlights the importance of OFAC’s and OFSI’s advisories and the need for entities to evaluate the efficacy of their existing control frameworks. Their frameworks must be capable of identifying, assessing, and mitigating sanctions risks associated with potential Russian exposure.
Self-Sanctioning Practices
In certain instances, maritime industry organizations have opted to self-sanction against Russia-related business, applying restrictive risk appetites to curtail business with a Russian nexus, even where such activity is legally permitted. This requires robust detection and prevention processes finely tuned to the entity’s risk appetite and tolerances.
Deceptive Shipping Practices
The advisories identify several deceptive shipping practices used to circumvent sanctions and avoid detection of illicit activity. Vessels often employ a combination of tactics to obscure or falsify information, such as their location or a cargo’s origin or destination. OFAC’s maritime guidance lists seven common deceptive practices: disabling or manipulating the Automatic Identification System (AIS), physically altering vessel identification, falsifying cargo and vessel documents, ship-to-ship transfers (STS), voyage irregularities, and concealing or misrepresenting the true ownership or control of a vessel.
Conclusion
The maritime sector continues to face a significant and evolving threat from sanctions risks, requiring entities in the energy, metals, commodities, and other sectors involved in maritime trade to understand their complex risk profiles and implement proportionate sanctions controls frameworks to mitigate these risks.
Original Article: Sanctions Risks: Deceptive Shipping Practices — Deloitte